Apple CEO Tim Cook in the Hot Seat at D

Cook, as Steve Jobs did several times during his career, is taking the stage at D: All Things Digital for an in-depth sit-down with Kara Swisher and Walt Mossberg. Cook’s appearance will kick off the conference, which runs through Thursday in Rancho Palos Verdes, Calif.

6:46 pm: Walt notes that Apple used to have factories in the U.S. He asks if Apple ever envisions having big manufacturing in the U.S.

“I want there to be,” Cook says.

This is not well known, Cook says, but the engines for the iPhone and the iPad are built in the U.S., in Austin, Texas. The glass is made in a plant in Kentucky.

There’s an intense focus on the final assembly, Cook says, but a lot of the value is in the different materials.

On the assembly piece, could that be done in the U.S.? “I hope so, someday,” Cook says, but he notes that the tool-and-die industry has shrunk dramatically.

“There are things we can do, and that’s what we are working on,” Cook says. “We should do more semiconductor things in the U.S.”

6:51 pm: One thing that has changed a lot since the first D conference, Cook says, is the explosion of mobile apps, which he says is a huge industry that has grown up in the U.S.

“It’s big enough to be in the Bureau of Labor Statistics.”

So, Kara asks, why be in the computer business?

“I don’t see the tablet replacing the need for all PCs,” Cook says. But, he notes, it may slow the replacement cycle for computers.

Kara asks about the patent wars. Is it a problem for innovation?

“Well, it is a pain in the ass,” Cook says.

He says Apple can’t afford to paint a painting and then have someone else sign their name to it.

“From our point of view, it is important for Apple not be the developer for the world,” Cook says. “We just want other people to invent their own stuff.”

Walt: But lots of folks are suing Apple, too.

Cook acknowledges that, but says there is a difference.

“The vast majority of those are on standards-essential patents,” Cook says. “This is an area where the patent system is broken today.”

Microsoft has a similar beef with Motorola.

“No one should be able to get an injunction off a standards-essential patent,” he says.

Apple has not sued anyone over standards-essential patents that we own, Cook says. This was never the intention of a standards-essential patent.

If you add up all the money that people feel they are owed for such patents, he says, no one could afford to be in the phone business.

“It’s kind of gotten crazy,” Cook says. “It’s not going to stop us from innovating, but it’s overhead. It’s overhead that I wish didn’t exist.”

Apple recently had court-ordered settlement talks with Samsung, but Cook says he couldn’t comment on those, per the magistrate’s order.

Kara: So what do you think of Google’s painting? Cook demurs: “I love Apple’s painting,” he says.

6:58 pm: How do you look at competitive landscape when it comes to smartphones? Kara asks.

“I wouldn’t say we dominate it,” he says. “I’d say we have the best phone.”

There are two big ones, Android and iOS, Cook says. Windows Phone is just really coming to the market, he says.

“We’ll see how they do.”

Then you have RIM, which is still serving some large number of enterprise customers. The momentum right now are in the first two.

“Will that change? Anything can change. The smartphone revolution is still in the early stages.”

It’s a huge opportunity still, he says, noting that in a few years there will be few phones that aren’t smartphones.

7:01 pm: Walt notes that Android makers are focusing on fewer models than in the past.

“I wonder where they got that idea,” Cook says.

What about Apple? Walt says, noting that it only has one new iPhone at a time, as contrasted with the Mac and iPad. Why don’t you have more than one iPhone and more than one iPad? And is there any chance you might?

“Our North Star is to make the best product,” Cook says, adding that Apple doesn’t design products for schedules. “There’s not a policy or commandment that says ‘Thou shalt have One.'”

“If we find that we can do more, great.”

Cook notes that Apple’s approach avoids fragmentation, with one screen size and one App Store with one policy.

7:04 pm: Walt: Why not make a $99 iPhone?

“Who knows what we will do in the future?” Cook says. “I am not going to conjecture.”

He says that with the iPod, Apple didn’t set out to cover all the price points, but instead found it could build a lot of great products. That, he says, was the result, but not the goal.

“Whenever we can do fantastic products and they yield great price points,” that’s great, he says.

7:06 pm: Kara turns to another topic: TV. Steve Jobs talked a lot in his last appearance here about wanting to change TV.

Cook notes that Apple has stayed in the Apple TV business, even without a huge hit.

“We’re not a hobby kind of company, as you know.” The company tends to put a lot of wood behind a few arrows. “We’ve stuck in this.”

“It’s not a fifth leg of the stool. It’s not of the same market size as the phone business or the Mac business or the music business or the tablet business.”

Apple sold 2.8 million Apple TV devices last year, and has sold nearly that many in the first few months of this year.

“This is an area of intense interest for us,” Cook says.

“We are going to keep pulling the string and see where this takes us,” Cook says.

7:09 pm: Walt: What about a TV set?

Cook: “You were right. I’m not going to tell you.”

Walt: Hypothetically, can TV be improved with just a box, and leaving the panel to others?

Cook: “We would look not just at this area, but other areas, and ask, can we control the key technology? Can we make a significant contribution far beyond what others have done in this area? Can we make a product that we all want? … Those are all the things we would ask about any new product category.”

Kara: Is Apple TV good enough?

Cook: It’s more something where you keep pulling the string to see where it goes.

Walt and Cook disagree over whether there is or isn’t a lot of content on there.

Walt says that Apple is not solving every problem with the current Apple TV.

“I agree,” Cook says

“Kara, what question did you have?” Cook says, hoping to change the topic.

Kara: How is your relationship with Hollywood?

“We have very good relationships with the content owners,” Cook says. “We don’t want their stuff to be ripped off.”

Apple, he says, took the same approach with music. Cook notes that there was a generation that didn’t think it should have to pay for music, but that would have led to no artists.

Plus, of Hollywood, he says, “These guys have been buying Macs forever. There is a level of trust in those relationships. Steve brought us even closer because he also owned a content business for a while [Pixar].”

Kara: What is their biggest complaint of Apple?

“I don’t know,” Cook says. “I’ve met with several of them recently. They were talking about what more we could do with them,” rather than some issue.

7:16 pm: Walt: Are you working on some new kind of content business?

Cook: “Kara, what question did you have?”

Kara repeats Walt’s question.

“I don’t think Apple has to own a content business,” Cook says. “We haven’t had an issue, for the most part, getting content.”

“This is an area where Apple partnering well is the right approach.”

The best thing Apple can do, Cook says, is make a great vehicle for selling content. “The consumer loves it because they can get it where they want it, when they want it.”

7:18 pm: Walt asks about Facebook integration.

“Facebook is a great company. I have great appreciation for them.”

Walt: But yet Twitter is integrated and Facebook is not. Why not?

“I think the relationship is very solid,” Cook says. “We have great respect for them. I think we can do more with them. Just stay tuned on this one.”

Are they still onerous to work with?

“They have their way of doing things, but people could say the same thing about us.”

“Because you have a point of view doesn’t mean you can’t work with someone.”

Kara: Do you see more acquisitions in the future?

“We continue to buy companies,” Cook says. “They are not ones we seek to make public.”

Kara: Don’t you have to, eventually?

“It depends on the amount. If I don’t have to, I won’t.”

That’s part of the doubling down on secrecy.

Kara: Did you look at Instagram?

“We didn’t look at Instagram.”

As for other big ones?

“I wouldn’t rule it out. We’re not looking at a big one right now, but I wouldn’t rule it out.”

We haven’t bought a company for revenue stream, he says.

“It’s not how we are wired,” he says.

Walt notes Apple bought Siri, which actually demoed at D before Apple acquired them. Siri, Walt says, is great when it works, but it doesn’t work a lot of the time. That’s not what a lot of people have come to think about Apple products. What’s going on with that?

Cook: “Customers love it. It’s one of the most popular features of iPhone 4S. But there’s more that it can do, and we have a lot of people working on this. And I think you will be really pleased with some of the things you’ll see over the coming months on this. We have some cool ideas about what Siri can do. We have a lot going on on this.”

Kara: Is voice critical for the phone?

Cook: Voice, where it understands the context, is powerful.

“I think Siri has proven to us that people want to relate to the phone in a different way.”

What makes Siri cool, Cook says, is she has a personality.

“I think you are going to be really pleased with where we take Siri.”

“Is it going to be bossier?” Kara asks.

“Is that what you are looking for?” Cook says.

“Always,” Kara says.

Cook says he would put it in the category of “profound.” It’s the artificial intelligence piece, he says.

“This is something that people dreamed of for years, I think, and it is here. Yes, it can be broader and so forth, but we see unbelievable potential here.”

“We’re doubling down on it.”

7:27 pm: Kara: What do you do all day? What do you see your role at Apple as on a daily basis, and are you a visionary?

Cook: “Steve was a genius and a visionary. … He’s an irreplaceable person. Steve was an original, and I don’t think there is another one of those being made. I’ve never felt the weight of trying to be Steve. It’s not who I am, and it’s not my goal in life.”

I spend my day working with teams on various products, including “some things we didn’t talk about, and maybe some things you wanted to talk about.”

“It is my oxygen, that’s how strongly I feel about it.”

7:30 pm: Who’s the curator at Apple these days? Walt asks.

Cook: “We have a privilege, because if I look around the executive team, many of the people are people I have been working with for double-digit years.” We all get along well, Cook says.

No one person can do it all, Cook says.

“You could have an ‘S’ on your chest and a cape on your back, and not be able to do it all.”

Cook says, “I wouldn’t get overly focused on who does what piece.” There’s a lot of key people, and there have always been a lot of key people.

Kara: What’s your goal? Make a trillion dollars, create your version of the CIA?

“I just want to build great products,” Cook says. “I think if we do that, then the other things follow.”

Companies can get lost, he says, focusing on revenue, profit or stock price.

“You have to focus on the things that lead to those,” he says.

7:33 pm: What do you look up to? Is there a person or a company?

Cook: “If you walked in my office, you would see Bobby Kennedy and Martin Luther King. If you are talking about CEOs that are living … I have incredible respect for Bob Iger and what he has done at Disney. (Iger is on Apple’s board.)

7:34 pm: On to Q&A.

7:35 pm: First question: Apple used to have big discounts for education.

Cook: “There is still a discount for institutions, and for individuals.” Apple has also done things at back-to-school time, with a special offer. “We are going to keep doing that,” Cook says.

Those discounts added up to $750 million last year, Cook says. “It’s not an insignificant amount.”

He also pointed to the work Apple is doing with its free iTunes U courseware. Apple also launched the iBook creation tool in January that Apple is giving away for free.

“Today’s textbook is dog-eared and seven years old and behind the times,” Cook says, adding that education has been a key focus of Apple since its earliest days.

7:37 pm: Next question from Fortune’s Adam Lashinsky, who just wrote a Tim Cook cover story for the magazine, presumably without an interview.

“It’s nice to be able to ask you a question,” Lashinsky says.

What would you say are your strengths and weaknesses as a CEO and person?

“I’ll leave that for you,” Cook says.

He follows up, asking if Cook is as involved on design and marketing.

Cook says no; that Steve spent more time in those areas.

“I would say I am spending time in several areas, not exclusively those two,” Cook says.

7:39 pm: What about Apple using so much bandwidth? As very few companies supply that, does Apple need more control of that?

Cook: “Do I think we need to own a carrier or the pipe? No. I don’t think we need to do that.”

Cook noted that the vast majority of Apple’s business is outside the U.S.

“Owning something just in the U.S. would not have great value in our total worldwide footprint. I really think that guys that have it know a lot more about it. This is their area of expertise. … I want to make great devices and use some of the bandwidth. I think we can partner with the pipe owner.”

7:41 pm: What did Steve say to you to encourage you to join Apple when you did, and did you see Apple becoming what it has become?

“It was a very interesting meeting. Steve had hired an executive search firm to find someone to run operations. I had gotten a call a few times, and said no. They kept calling, and they kept calling.”

He flew out Friday on a red-eye for a Saturday morning meeting. “Five minutes into the conversation, I am wanting to join Apple. I am shocked at this, because it wasn’t what I envisioned at all.”

“He was taking Apple deeply into consumer at a time when others were doing the opposite.”

“I have never thought following the herd is a good strategy. You are destined to be average, at best.”

Also, he says, he was impressed that Jobs wasn’t focused on money.

“I thought, I am going to throw caution to the wind and do this,” Cook says, adding he resigned immediately from his former job.

He can’t say that he saw iPhone and iPad coming, but he saw the passion in Apple customers, as well. They might get mad, but they stayed loyal.

“An Apple customer was a unique breed.”

7:45 pm: How does Apple name products, like iPad to iPad 2 to iPad?

“A lot of people ask me that about iPad,” Cook says. Cook notes that the same thing happened with iPod, with iPod mini, iPod nano, and then started just updating those.

Others are like that too, he says, pointing to the iMac and MacBook Air.

Of course, the company has done things differently with the iPhone.

“You can do it either way, is the real story,” Cook says.

The iPhone, for example, went from 3G to 3GS, with the letter “S” connoting speed. In 4 to 4S, the “S” stood more for Siri.

Kara: What about the iPhone 5?

Cook: “Who had the next question?”

7:49 pm: What has been the biggest challenge in the post-Steve Jobs era?

Cook: He knew everyone well, and it was a culture that he loved. “All of the things that maybe a CEO coming into a new company would see, I didn’t have any of those challenges.”

Once named CEO, Cook started getting thousands of emails per day. The privilege of it is that most of them are from customers. “They talk to you as if you are sitting in their living room.”

That, he says, was a bit of a surprise. He had been getting hundreds. Today, he says, it is a privilege. Especially since he doubts it is like that somewhere else.

Cook: “Wearable: I have on a Nike Fuel Band. I think there are some cool things that can be done. I think it is an interesting area. The question is, can it change somebody’s behavior? The book hasn’t been written on that yet.”

If it is just a cool thing, to know if it will fade, but if it can change behavior, more to it.

As for pen computing: “I sort of like what we are doing right now,” Cook says.

7:53 pm: What about the gaming space? You’ve sort of fallen into being a big player in the gaming space. Do you see big-screen gaming as something you’ll get more into?

Cook: I view that we are in gaming now in a fairly big way. One of the reasons people buy an iPod touch is gaming. Some buy it for music. I realize that is not the big screen you are talking about. Gaming has kind of evolved a bit. More people play on portable devices. Where we might go in the future, we’ll see. Customers love games.

I’m not interested in being in the console business in what is thought of as traditional gaming. But Apple is a big player today, and things in the future will only make that bigger.

But what about the TV?

“I think it could be interesting,” Cook says.

7:57 pm: What about all the press Apple gets, including enthusiast sites?

It’s largely a privilege. Does he want company secrets printed on a Web site? No. But he likes the attention and passion.

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